Sunday, May 5, 2013

Entre-Hire: The Ultimate Startup School

When considering their next career move, aspiring
entrepreneurs generally follow conventional wisdom and start a company. Similarly,
most serial entrepreneurs who were unsuccessful in their first attempt to build
a business or reach an exit also make the same decision. They simply pick up
and start another company, instinctively becoming a career entrepreneur without
much distraction. Such persistence, determination and independence are
admirable traits, necessary for success as an entrepreneur. However, contrary
to popular belief,entrepreneurial individuals do not need to be founders
throughout their careers in order to create amazing products or have
outsized impacts on companies.

Lately, I find myself pitching and persuading both
experienced and first-time entrepreneurs to abandon their project/idea and join
an exciting startup already on the path to success… and help make it an even
bigger success. Conversely, I find myself cheering for my portfolio companies
that make a concerted effort to seek out fellow entrepreneurs as they expand
their executive teams. This “entre-hire” trend is just as exciting as the now
celebrated “aqui-hire” M&A trend. I have seen too many startups fail to realize
their potential because they lost their entrepreneurial edge as they surrounded
themselves with minions or corporate execs. There may be such a thing as “too
many startups,” but never “too many entrepreneurs” if their talent is properly
harnessed by the surrounding ecosystem. Startups always need entrepreneurs.

While there is no substitute for starting your own company,
I strongly believe that entrepreneurs are more likely to be successful when
they have previously held pivotal positions in successful startups, something
often lacking in first-time entrepreneurs. There is something about experiencing
a company struggle, grow and succeed from the inside that prepares a future entrepreneur unlike anything else. Although
there is no such thing as a school for entrepreneurs, working in a successful startup
is as close as one can get to a startup education.

With so many successful startups in our midst, I am curious
to know why larger numbers of entrepreneurial minds don’t pad their resumes with
interesting positions at more established startups known to be success stories
in the making. While these startups may
appear to be past their innovation prime, the reality is often quite different.
Many startups use their initial success to rapidly expand their product
portfolio and business in multiple directions. These startups are acutely aware
that initial success can be a source of complacency, a danger to any high tech
company, and are therefore looking for fresh entrepreneurial blood to inspire,
lead and execute. Obviously, this is a proverbial “two-way street.” Startups
benefit from hiring new entrepreneurial talent as much as those very
entrepreneurs do from working – and learning – at an established, successful startup.

I can’t but comment on the so-called “PayPal Mafia,” the
group of independent entrepreneurs who emerged from PayPal after its sale to
eBay. PayPal’s incredible legacy as a successful startup is not solely defined
by its thriving business as a unit of eBay, but also by the numerous successful
startups that it ultimately spawned. Former executives and employees at PayPal
went on to found LinkedIn (LNKD), Yelp (YELP), Slide (Google), Tesla (TSLA),
Yammer (Microsoft), Geni (MyHeritage), and
YouTube (Google), among others (incidentally, BVP is an investor in LinkedIn,
Yelp and Geni, the latter through MyHeritage). One can only imagine how
difficult it must have been to build an organization overflowing with so much raw
entrepreneurial talent! But that’s the point. Building a scalable startup that
can continue to grow at a breakneck pace requires periodic infusions of both capital
and entrepreneurial talent.

As much as entrepreneurs should aspire to match PayPal’s
success as a business, they should also dream of spawning the next generation
of successful entrepreneurs, even if it means reluctantly supporting employees
that leave to start their own companies. Successful founder CEOs should work to
continually deepen the management bench with outstanding people. While many
roles in a startup require considerable functional and domain expertise, there
should also be room for more creative and versatile individuals capable of
thinking out of the box and knocking down walls. In short, startups should make
an effort to recruit and accommodate former entrepreneurs and aspiring
entrepreneurs. It is no easy task to recruit a fellow entrepreneur looking for
independence, influence and due reward upon success, but it must be attempted
repeatedly until successful. The ideal stage for such recruiting entrepreneurs is
when the first product has proven successful and there is a need to start work
on additional products and/or business channels.

One particular company in my portfolio stands out as a role
model. While it is not yet obvious to the outside observer, Wix has made a conscious effort to recruit,
empower and retain super talented entrepreneurs that would have otherwise
created companies of their own. At last count, there are at least 7 former
entrepreneurs leading various products and projects at Wix. Two additional
portfolio companies of mine embracing this hiring trend are Fiverr and MyHeritage, both of which have hired
former entrepreneurs into their most senior executive positions.

This is not just an international trend nor a practice
unique to consumer Internet companies, but a hiring strategy we are witnessing
across our US portfolio and across industry sectors. Other
BVP portfolio companies that have successfully recruited entrepreneurs are SendGrid, Simply Measured and 42Floors. We know this trend is also common
among Y-Combinator companies, where stronger startups in the incubator often
gobble up talented entrepreneurs from other companies in the class. I suppose
that’s reason enough to apply to Y-Combinator.

It’s too early to identify where the next PayPal Mafia will
emerge from, but I have little doubt it will be in a company that is willing to
take the risk in recruiting entrepreneurial talent long after its founding. As
for aspiring entrepreneurs, whether or not you have raised seed capital: consider
going to school by seeking successful startups willing to give you the space to
make an impact.

I always used to remain worried about the unexpected business losses. Since, my father insisted me to form a new Ltd company, I had to agree with him, because he is an experienced person, and he wanted to protect my personal assets, in case something goes wrong with the company.

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The thoughts and opinions expressed herein belong to the author and do not necessarily reflect those of Bessemer Venture Partners or any of its affiliates (“Bessemer”). The material here is written on the author’s own time for [his/her] own reasons and Bessemer has not reviewed or approved the information herein. Any discussion of topics related to Bessemer or its investment activities should not be construed as an official comment of Bessemer.